Do we need to worry about Social Security being changed?

By Janice Gough

A falsehood about Social Security that is widely repeated is that the Social Security trust fund is already bankrupt since there is no money left in it--it’s already been spent by the government. But that represents a fundamental misunderstanding of basic accounting.

By law, the SSA must invest any surplus in the Social Security trust fund in U.S. Treasurys. In return, SSA carries those Treasurys on its balance sheet as an asset. Claiming that the Social Security trust fund is broken is equivalent to claiming that every corporation that owns Treasurys must also wipe those assets off its books.

Apple (AAPL), for example, has over $30 billion in U.S. government securities on its balance sheet, according to its latest annual report. Indeed no one thinks those assets are worthless.

What if Congress never can agree on any changes? Yet another aspect of this debate that needs correcting is the worry among many eventual Social Security recipients that, if Congress cannot agree on making any changes, they will receive nothing after 2034. That’s not true; according to SSA, they would still receive 77% of benefits. That’s not great by any means, but neither is it the end of the world.

The head of the National Association of Registered Social Security Analysts points out that even if only threequarters of scheduled benefits get paid, Social Security will still be the primary source of income for many, if not most, retirees. Moreover, a study confirms that most politicians would not allow payments to be less than 100 %.

It’s time to correct misunderstandings about Social Security. Thanks to President Biden’s State of the Union speech, the debate over the future of Social Security has made it into the frontpage headlines.: ‘Let’s stand up for seniors’: Biden invites Republicans to promise that Social Security cuts are off the table. Perhaps now we can, once and for all, dispense with the urban myths about Social Security that up until now have created debate. Regardless of how we think Social Security’s challenges should be met, this debate must be based on cold, hard facts. Thus, I wish to elaborate on whether the allegations are factual or Incorrect.

To begin with, I will address that Social Security is facing a “crisis.” This simply is not accurate, at least according to the standard dictionary definition of a crisis as “a sudden change.” We have known for decades that Social Security’s finances would need to be augmented as the baby boom generation retires.

Consider what was known as long ago as 1983, when the last significant legislative changes were made to shore up Social Security’s finances.

Actuaries at the Social Security Administration (SSA) correctly projected that. In light of those changes, the Social Security trust fund could pay out all benefits from 2030 to 2050. Their projections have proved remarkably accurate, as the SSA currently projects that the trust fund will be unable to pay out 100% of benefits starting in 2034. Thus. We have known for four decades that fixes would need to be made by 2030 or soon after. There is no longer a Social Security funding “crisis today, as actuaries and politicians took years to enact the 1983 legislation. For many years, SSA actuaries had projected that the trust fund would be unable to pay out 100% of benefits beginning in the early 1980s. As that insolvency date approached, the deadline for action was pinpointed as July 1983. Yet the Social Security Amendments of 1983 weren’t signed into law by then-President Reagan until April 20, 1983--with just 10 weeks to spare.

The 1983 example shows a considerable lead time for that year’s legislation; with that in mind, we shouldn’t expect the next round of changes to be enacted for at least another decade. It’s irrational to wait that long, to be sure since it becomes costlier to restore Social Security’s finances the longer we delay it. How and when to take social security can be tricky. Call us for help!

The bottom line? Everyone can agree that Social Security’s finances need to be changed. But a “crisis” mentality is not conducive to having an earnest debate about how to make those changes.

Janice Gough is a Financial Consultant in Palm Springs, located at 1111 Tahquitz, Bldg#120. {The Law Building}. Contact us by calling (760) 251-7724 or Mobile at (650) 200-8291 or Emailing: Janice@ GoughFinancialSvcs.com